Monday, February 19, 2007

Taxes in Florida

One of my favorite Monty Python sketches had a "man on the street" interview where they asked a buffoonish guy how to fix the nation's fiscal crisis. His classic answer was... after much thought...

"We should tax all foreigners living abroad"

Well I am down here in Florida, and since my interests are so odd, I am reading an article from The Miami Herald titled "All options are on table in property tax crisis".

Essentially, Florida has followed the Monty Python advice to date; they don't have an income tax, they do have a sales tax, and their property tax is designed to give year-round residents a break and stick it to part-time second home owners and businesses. I don't fully understand how it is legal to charge more to second home owners and part-time residents; isn't that impacting interstate commerce? Regardless, it is common practice here. Logically, you'd think that second home owners would pay LESS taxes because they use less state and local services - their kids don't go to public schools here (probably because they went to good private or public schools in another state in the Midwest or the East or they couldn't afford the second home in the first place) and they aren't on welfare (obviously) and don't use much in the way of public services like fire and police.

There is a state act called "Save Our Homes" which limits the growth in property taxes to 3% / year starting in 1995 for residents that receive the exemption; per the article:

"In 1995... the measure removed $3.5 billion from the property tax rolls. Today, it has kept a quarter of the state's $1.6 trillion total taxable property value off the rolls."

Of course, this law has created a group of individuals that receive the exemption (until they move) that is powerfully focused on keeping this law in place, and since they are generally old without much to do, you can bet that they will vote. This is exactly the kind of constituency that you don't want to create, a single issue voting bloc, but that is what they have here in Florida.

Even though this unfair and inequitable tax policy is killing them in Florida, someone is proposing EXPANDING the program. They want to amend the program so that if you have the exemption and you move, you retain the exemption going forward.

Let's think about the logic of this. There was a micron of logic in the original program because elderly people on fixed income get creamed by rising property taxes, so limiting growth to 3% / year gives them a chance to stay in their homes. There would have been a lot of other ways to fix this that would have been better, such as 1) limiting the growth in state spending to 3% / year, which would have accomplished that goal for everyone 2) a means-tested exemption for elderly people who qualify. Unfortunately, this broad based program is obviously unfair and now it goes WAY off the rails of logic with the idea that just because you were a resident and owned a home in 1995 when the program started, now you would get a portable right to limit YOUR property tax growth which essentially shifts it onto your neighbor who just arrived here because he wasn't a resident in 1995.

Another reason this is so unfair is because much of the dynamic nature of the state of Florida is driven by new arrivals; they are the ones renovating the hotels, bringing in new businesses, and injecting economic life into the state. The retirees are not the ones that you want to attract from a business perspective; at best they are cheap consumers and they burden the state with expensive services; plus, your property tax rates as a business owner AND as a new resident skyrocket to subsidize them.

This will be interesting to see play out. At least in Illinois our system is equivalently corrupt and unfair to all of our residents, although we do overload our property tax burden on business owners. It would be interesting to ask a rich retiree in Florida to defend the ethics of this program; I want state government costs to increase, but I don't want to pay for them. A sad voting bloc, indeed.


sonicfrog said...

Hey, at least the new Governor is ditching the touch screen voting machines for the fill-in-the-bubble type of ballot. We use this scan-tron method of voting here in Fresno, and I must say, it would be pretty hard to screw up the vote using this system. But then again, I'm sure someone will find a way.

Jonathan said...

Florida state govt is actually pretty good on the whole. The big problem with property taxes is in places like Miami, where local govt has been on a decade-long spending binge fueled partly by bonds. The pols have treated bond revenues as free money to be used for cultural centers, museums and other vote-buying projects. Meanwhile, inflated home valuations have effectively raised already-high property taxes. I think property taxes are probably about as high as they can go without being politically unsustainable. Where does that leave Miami if the economy slows down, overall tax revenues decline and it becomes difficult to pay off all those bonds? Good question. A lot of the local pols are simply reckless with their spending, and too many voters don't care.

Dan from Madison said...

Off topic, but glad you got to some warmth in Florida. It actually got up to 45 up here today and my whole warehouse crew is wearing short sleeved shirts. Relativity.

Jonathan said...

I think it got down to about 40 here on Saturday night.

Dan from Madison said...

Think about it this way - 45 degrees is SIXTY degrees warmer than it has been at night at times. Like I said, relativity.

Tampa Bay Frank said...

Ok Folks you have the following choices:
1. Do nothing and watch revenues fall when the non-residents sell and relocate to other warm climates.
2. Abololish the current property tax system and assess everyone at the same rates without rate (rape) caps.
3. Impose flat 2% state income tax.
4. Impose Sales tax (1-3%).
5. Let the courts decide after non-residents file a class action law suit claiming unfair taxation.
6. Reduce the excessive governmental spending (this state was on a binge when other northern states were cutting back drastically...I know...I saw the impacts up north.
7. A sensible combination of all the above.

Folks....Get your heads out of the sand. Nothing in life is for free. You need to decide what you need and can afford.

Tampa Frank